Microsoft's “flexible virtualization” option aims to expand the hosting provider ecosystem.

Jeffrey Schwartz

August 29, 2022

6 Slides

Seeking to relax restrictions that face hosting and outsourcing providers, new Microsoft licensing terms will take effect Oct. 1. Several significant changes, which the software giant revealed on Monday, apply to the Microsoft Cloud Solution Provider (CSP) program.

Among them, MSPs can no longer use Microsoft’s Services Provider Licensing Agreements (SPLA) to buy software. Microsoft is changing the SPLA terms because the company never intended partners to use the program outside of their hosting operations. Although the new SPLA rule takes effect in October, partners will have three years to transition outsourced hosting licenses.

Microsoft is changing the SPLA program “to better align with the program’s intent, and with other commercial licensing programs,” explained chief partner officer Nicole Dezen, in a blog announcing the new licensing plans. “Traditional outsourcers and data center providers will benefit from this change, and it will help foster the hosting partner ecosystem,” she added.

The new licensing terms will offer expanded use rights, allowing partners to host customers’ software in their multitenant infrastructures. Microsoft also is adding a Flexible Virtualization option. This aims to make it easier for partners to provide cloud hosting based on customers’ location needs.

Customers with Software Assurance or subscriptions will also be able to license Microsoft software on a virtual core basis. This will include Windows 11 and Windows Server licenses, using the new Flexible Virtualization benefit.


Microsoft’s Nicole Dezen

“Partners have asked Microsoft to simplify licensing and to expand the range of products that can be offered to customers at fixed pricing for longer terms, and we’ve responded,” Dezen noted. “We also want to provide more opportunities for customers to be able to have Microsoft software hosted on partners’ infrastructure.”

Initiated in Europe

Microsoft signaled it would ease licensing in May when company president Brad Smith outlined new principles for European cloud providers. Smith noted that Microsoft wanted to make it easier for partners to host its offerings in their own clouds. Driving Smith’s attention was the European Union’s Digital Europe road map to digitally transform industries and forthcoming regulatory changes surrounding it.

“Cloud service providers of all types must work through how to best meet the obligations of coming regulatory changes,” Smith noted in May. “This is not just a European phenomenon; it is a worldwide challenge.”

Dezen emphasized that Smith’s announcement was an inflexion point for making the changes globally.

“We affirmed our commitment to making these changes to Microsoft’s licensing terms and partner program,” she noted.

It remains to be seen how many partners welcome the changes.


Techaisle’s Anurag Agrawal

“The new licensing is designed to benefit the more significant partners deploying cloud solutions in their data centers or building private clouds for their customers in their data centers,” said Anurag Agrawal, founder and chief analyst at Techaisle. “It is unclear if the announcement simplifies one of the industry’s most complex licensing paradigms or complicates it further. We will understand better when the partners begin to participate.”

Agrawal added that Microsoft should have tried coordinating the new licensing with the revamped partner program. Both go live simultaneously, and many partners are still angry with those changes.

“I wish they had taken the opportunity to demystify and de-complexify [the] licensing and incentive structures simultaneously,” he said. “Nevertheless, the announcements show that Microsoft is taking partner feedback seriously.”

We break down the new licensing changes in the slideshow above.

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About the Author(s)

Jeffrey Schwartz

Jeffrey Schwartz has covered the IT industry for nearly three decades, most recently as editor-in-chief of Redmond magazine and executive editor of Redmond Channel Partner. Prior to that, he held various editing and writing roles at CommunicationsWeek, InternetWeek and VARBusiness (now CRN) magazines, among other publications.

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